Inventory is defined by FASB Accounting Standards Codification as "the aggregate of those items of tangible personal property that have any of the following characteristics:

a. Held for sale in the ordinary course of business
b. In process of production for such sale
c. To be currently consumed in the production of goods or service to be available for sale".1

The accounting standards codification further explains that inventory includes retail merchandise, manufactured finished goods, work in process, and raw materials and supplies. Typically the cost of inventory also includes any duties, transportation, warehouse, insurance and any costs associated with getting the goods available for sale. Similarly, any purchase discounts are subtracted from the cost of inventory. Depreciable assets should never be classified as inventory, even where they are retired from regular use and held for sale.

Perpetual Inventory System

There are two systems for accounting for inventory: (1) a perpetual inventory system or (2) a periodic inventory system. Under a perpetual system, each time an item is sold the inventory and cost of goods sold accounts are updated. This system is usually more practical for businesses that sell single, unique, big ticket items: such as a jewelerly shop or car dealership. However, with the advent of RFID tags and better technology for tracking inventory, the perpetual system is becoming more common. Under the perpetual system, a sale or sales return can be recorded with a compound journal entry.

Periodic Inventory System

Under a periodic system, inventory is only updated periodically (typically at the end of the period) by doing a physical inventory count. When a sale or sales return occurs under the periodic system, we simply record the sale and corresponding accounts receivable. Although we know that the sales has reduced our inventory, we do not update the inventory account at the time of the same.

We wait until the end of the period to calculate ending inventory and cost of goods sold. We calculate ending inventory by taking the number of units of inventory left and multiplying this number by its per unit cost.

The periodic system has special implications for accounting. Our main concern using the periodic method is how to value ending inventory. That is, when we do our ending inventory count, we have to decide what value to use for our inventory's per-unit cost. There are four generally accepted 'cost-flow' methods for assigning costs to ending inventory and costs of goods sold: FIFO, LIFO and Weighted-Average Cost.2

Additionally, sometimes under the periodic method we are required to estimate our current inventories. For example, in the case of theft or fire, we may need to estimate our inventories for insurance purposes. The two most common methods for estimating inventories are the gross profit method and the retail inventory method.

Weighted-average costing assigns an average cost to ending inventory and cost of goods sold based on the total cost and total number of units available for sale during the period. Moving-average cost is the same, but allows a weighted average cost to be used under a perpetual inventory system.

See the attachment.
Swan Limited follows the practice of closing of its books on 31 March every year. The company was considering an offer to sell off the business at the beginning of 2014 but due to some differences the deal was not finalized and the company carried out stock taking on 10 March 2014. The value of stock on th

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Cash $80,000
Merchandise Inventory (3,000 units at $3 each) 9,000
Delivery trucks 75,000
Note payable (10%) 70,000
Common stock 94,000
During 2011, the two companies ha

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Consolidated Balance Sheets (partial), Consolidated Statements of Operations (partial), and Inventory
COMP 8-1. Complete the requirement for each of the following independent cases:
Case A. Dr. Pepper Snapple Group, Inc., is a leading integrated brand owner, bottler, and distributor of nonalcoholic beverages in the United

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Find the cost of goods sold and the cost of ending

Hello, I need some help with the below. I don't feel I have enough experience to answer the below questions.
Nancy Co. is in a technology-intensive industry. Recently, one of its competitors introduced a new product with technology that might render obsolete some of Nancy's inventory. The accounting staff wants to follow t

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2. The Fine Garments Company wants to use a reor

See attached document titled "Problem Operations Costing: Work-in-Process Inventory" to see the charted data for this problem.
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- Merchandise costing $30,000, shipped F.o.b. shipping point from a vendor on December 30, 2011, was received on January 5, 2012.
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Merchandise of $61,000 which is held by Garza on consignment. The consignee is the Bontem

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-Ordering cost

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Problem 7-36
Effects of Inventory Costing Methods on Income
Martin Merchandising has hired you to examine whether the company should use the LIFO or FIFO inventory costing method. The company uses a perpetual inventory system and
has supplied the following information for the month:
Required:
Prepare multi-step income sta

Exercise 7-17
Inventory Costing Methods
Hahn Hardware provides the following information relating to its June inventory activity. Hahn uses a perpetual inventory system.
Required:
a. Put Hahn's given information into a cost of goods sold model. What is unknown?
b. Compute the ending inventory and cost of goods so